Dollar/yen is defying all expectations: instead of crashing on safe-haven demand for the Japanese currency (something that did happen but lasted only a few hours), the pair is surging higher on expectations for “Trumponomics”: tax cuts and massive spending, resulting in inflation and rate hikes.
The most recent rise is a result of genuinely good news for the US economy: retail sales rose above expectations and previous data was revised to the upside.
But while the euro reacted with relative ease, the yen is currently the weakest link. Japan’s better than expected GDP numbers earlier this week do not really help.
USD/JPY levels
USD/JPY is trading at 109, the highest level since June, when it was falling quite sharply. The next level of resistance is a psychological one rather than a technical one: the round number of 110. BOJ officials must be cheering. There were fears that Kuroda and co. would need to intervene on a Trump-related crush.
Further above, 11.40 is a high seen in late May, when the pair was making lower highs on its way down. The next level is the round 112 number which served both as support and as resistance during the spring.
Even higher, 113.80 is strong resistance on the way to the round 115 number.
Looking down, 107.50 remains worth watching; it was a swing high in July. The round level of 105 is the next big figure.
More: USD/JPY: Targeting 115-120: The ‘Buy-On-Dip’ Cycle continues
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